Google parent Alphabet’s ad sales push up revenue
San Francisco — Google parent Alphabet reported revenue that beat Wall Street expectations, calming concern about slowing growth at the heart of the largest digital advertising company.
Alphabet also announced a plan to repurchase $25bn of the company’s Class C stock.
Second-quarter sales, excluding payments to partners, came in at $31.71bn, Alphabet said in a statement. Analysts were looking for $30.84bn, according to data compiled by Bloomberg. Revenue from Google’s own online properties, including Search and YouTube, climbed 18%. The shares rose more than 8% in extended trading.
Google’s ad sales grew 16% overall. That was slower than recent years, but it was a welcome relief from the first quarter of 2019, when Google missed Wall Street revenue expectations and saw its shares plunge. The stock had lagged rivals recently on concern poor results might continue.
Google is still able to find more places to put ads around the web, Christopher Rossbach, chief investment officer at J Stern & Co, said. “Many of Google’s growth opportunities remain. For example, advertising on its Maps properties,” he said.
For years, Google has grown its advertising business at an annual rate of at least 20% by stuffing more ads into mobile search results, luring viewers to YouTube and automating the web’s complex advertising process. The company is investing heavily in new technology, such as cloud computing and a voice-controlled digital assistant, while experimenting with different ad formats.
Thursday’s results buy Google more time to pursue these growth initiatives, along with longer-term projects including driverless cars.
“We’re delivering strong growth,” CFO Ruth Porat said in a statement. “Our ongoing investments in compute capabilities and engineering talent reflect the compelling opportunities we see across the company.”
Other revenue, which includes cloud business and consumer hardware, grew 40% to $6.18bn. That was faster than some previous quarters and eclipsed the growth of Amazon’s cloud business.
Late in 2018, Oracle executive Thomas Kurian was tapped as CEO of the Google cloud business. He narrowed the unit’s focus on specific industries and bought startup Looker for $2.6bn. The cloud business may be Alphabet’s best chance to earn money beyond advertising, but it is still far behind competitors Amazon and Microsoft.
Net income was $9.95bn, or $14.21 a share, in the second quarter. That compares with profit of $8.27bn, or $11.75 a share, a year earlier, Alphabet said.